Acceptance of a Contract by Silence, Inaction, and Subsequent Action
An interesting case out Texas recently came to our attention showing an intriguing example of how silence and subsequent actions can be deemed by a court sufficient to create a contract. Normally, we deal with California cases, but, occasionally, there are good lessons to be learned from decisions handed down in our sister states.
The case is Adcock v. 5 Star Rentals/Sales, Inc., Case No. 04-17-00531-CV (Tex. App. 4th Dist. — San Antonio 2018). The case involved an employer’s arbitration agreement that was signed in 2006 and its subsequent revocation in 2016 by silence and conduct. The plaintiff/employee, Jimmy Adcock, suffered an injury that he felt entitled him to workers’ compensation under the Texas workers compensation laws. However, Adcock claimed that his employer engaged in retaliatory conduct after he made his workers’ compensation claim. Because of this, Adcock planned to bring suit against his former employer for retaliation.
When he began working for his employer in 2006, Adcock had signed an agreement to arbitrate any disputes. However, it seems that Adcock wanted to avoid arbitration and, thus, leading up to his retaliation lawsuit, Adcock’s lawyer sent a letter to the employer demanding a copy of any agreement to arbitrate. The letter went further and stated:
“If my client does not receive a copy of the signed arbitration agreement in my office within one month of receiving this request, my client will proceed with filing suit in State Court and your failure to produce any signed arbitration agreement will be your acceptance to proceed in State Court and your waiver of enforcement of any arbitration agreement.”
Adcock’s attorney went on to argue in the letter that, since employees can be deemed to have accepted an agreement to arbitrate by continuing to work, an employer could be deemed to have accepted an agreement not to arbitrate by failing to produce an arbitration agreement.
The employer did not produce a copy of the arbitration agreement and did not respond in any way to the letter. Thereafter, the retaliation lawsuit was filed in Texas state court and the employer responded to the lawsuit in the customary manner. The employer did not make any argument that arbitration was required and did not seek to compel arbitration. As the case moved through the initial stages of litigation, a copy of the 2006 agreement to arbitration was produced. At that point, Adcock and his attorney changed their minds and decided that they did want to arbitrate and then sought an order from the court sending the case to arbitration.
However, the court said “no.” The trial court held that parties are free to make contracts, including contracts to arbitrate, and that parties are free to rescind or remake contracts. The court further held that, depending on the circumstances, silence, failure to act, and subsequent behavior/actions could be held to be legally binding acceptance of a proposed contract. The same rule applies here in the Golden State. Here in California, silence or inaction is normally not enough for a person or business to be legally bound to an agreement. See Southern California Acoustics Co., Inc. v. C. V. Holder, Inc., 71 Cal.2d 719 (Cal. Supreme Court 1969) (“[s]ilence in the face of an offer is not an acceptance, unless there is a relationship between the parties or a previous course of dealing pursuant to which silence would be understood as acceptance.”)
However, where silence is coupled with inaction and with some behavior or action taken in conjunction with the silence/inaction, courts have inferred acceptance from the combination of facts. This is the basis for arguing that workers can be bound by unilateral offers made by employers if they continue to work. The behavior — continuing to work — is a form of acceptance. In the Adcock case, this is how the court resolved the question of acceptance. The employer was silent and took no action with respect to the letter that was sent and then the employer engaged in litigation in the normal and customary manner in state court. Taken together, the silence and the behavior by the employer was deemed “acceptance” and the parties were held to have revoked the 2006 agreement to arbitrate. The case proceeded in Texas state court and was recently dismissed pursuant to settlement. See here.
Call San Diego Corporate Law Today
For more information, call attorney Michael Leonard, Esq., of San Diego Corporate Law. Call Mr. Leonard at (858) 483-9200 or contact him via email. Mr. Leonard has been named a “Rising Star” four years running by SuperLawyers.com and “Best of the Bar” by the San Diego Business Journal. Mr. Leonard’s law practice is focused on business, transactional, and corporate matters and he proudly provide legal services to business owners in San Diego and the surrounding communities.